Areas of Interest

Rawi E. Abdelal

Rawi Abdelal is the Herbert F. Johnson Professor of International Management at Harvard Business School and the Director of Harvard's Davis Center for Russian and Eurasian Studies.

Professor Abdelal's primary expertise is international political economy, and his research focuses on the politics of globalization and the political economy of Eurasia. Abdelal's first book, National Purpose in the World Economy, won the 2002 Shulman Prize as the outstanding book on the international relations of eastern Europe and the former Soviet Union. His second book, Capital Rules, explains the evolution of the social norms and legal rules of the international financial system. Abdelal has also edited or co-edited three books: The Rules of Globalization, a collection of Harvard Business School cases on international business; Measuring Identity; and Constructing the International Economy. Abdelal is currently at work on The Profits of Power, a book that explores the geopolitics of energy in Europe and Eurasia.

In 1999 Abdelal earned a Ph.D. in Government from Cornell University, where he had received an M.A. in 1997. At Cornell Abdelal's dissertation won the Kahin Prize in International Relations and the Esman Prize. He was a President's Scholar at the Georgia Institute of Technology, where he received a B.S. with highest honors in Economics in 1993. Recent honors include Harvard Business School's Greenhill Award, Apgar Award for innovation in teaching, and Williams Award for excellence in teaching, as well as, on several occasions, the Student Association's Faculty Award for outstanding teaching.

This is a book about the politics of the global economy — about how firms prosper by understanding those politics, or fail by misunderstanding them. Understanding the politics of globalization may once have been a luxury; it is now, for most high-level managers, simply a necessity. The book contains cases which can be used by instructors and students to build a framework of analysis that enables them to understand the challenges of international trade and investment and master the opportunities they represent. This framework is based on a systematic evaluation of the informal and formal rules that define markets for goods, services, and capital. These insightful cases allow for evaluation of: the political and economic origins of our current era of globalization and how the rules that constrain and enable firms are changing; the impact of governments' policies and which tools are available for predicting, avoiding, or even employing the long arm of the government; and the influence of informal and formal institutions on opportunities for success in international finance and trade.

Multinational firms unavoidably exert influence over politics through power that is generated by both structure and process. While both political economy and management scholars address international firms, neither field has an adequate understanding of the reciprocal relationship between multinational firms and geopolitical systems. The links between multinational firms form a distinct type of international system for the private sector—one that is simultaneously enmeshed in geopolitics and international markets even as it is also autonomous from them. The scholarly literature on the power of business in politics has demonstrated how influence derives from instrumental agency as well as structural influence, but it has taken an unnecessarily restrictive view of politics and an overly materialist theory of power. Politics are about much more than government policies. In this paper I propose an analytical framework for understanding the multinational firm as a set of relationships. I then apply one key element of that approach—the relationships among firms as a direct source of geopolitical outcomes—to the natural gas trade of Eurasia in three eras that span nearly 40 years. I conclude that the influence of business on a broader understanding of politics—and not just policies—should be central to the study of international and comparative political economy.

Although the energy trade is the single most important element of nearly all European countries' relations with Russia, Europe has been divided by both worldview and practice. Why, in the face of the common challenge of dependence on imported Russian gas, have national reactions to such vulnerability varied so dramatically across the continent? And why have a handful of French, German, and Italian corporations somehow taken responsibility for formulating the energy strategy–and thus the Russia policy–for essentially all of Europe? The resolutions of these two puzzles are, I show, interlinked; they also demand theoretical innovation. With several case studies–of Gazprom's decision making during the 2006 and 2009 gas crises and of the response of western and central Europe to their gas dependence–I find that firms are driving these political outcomes; those firms are motivated by profits but employ sociological conventions along their ways; and firms generally seek the necessary inter-firm, cross-border cooperation that will deliver corporate performance. Finally, I conclude that the field will ultimately require a framework that puts firms at its center.

Two alternate visions for shaping and explaining the governance of economic globalization have been in competition for the past 20 years: an ad hoc, laissez-faire vision promoted by the United States versus a managed vision relying on multilateral rules and international organizations promoted by the European Union. Although the American vision prevailed in the past decade, the current worldwide crisis gives a new life and legitimacy to the European vision. This essay explores how this European vision, often referred to as 'managed globalization,' has been conceived and implemented and how the rules that Europe fashioned in trade and finance actually shaped the world economy. In doing so, we highlight the paradox that managed globalization has been a force for liberalization.

The article discusses the effect of the global financial crisis of 2008-2009 on the outlook for Russia's economic growth. The discussion focuses on the status of capitalism in Russia and the government's central role in business. A brief history of Russia's economic policy and business conditions since 2000 is given. The growth of Russia's economy and the fiscal surpluses resulting from high oil prices are mentioned. The experiences of Royal Dutch Shell, British Petroleum Co. PLC, and Enel SpA, which made business investments in Russia, are also discussed.

By the turn of the century, oil had already made the tiny emirate of Abu Dhabi rich beyond anyone's wildest dreams. A sovereign wealth fund, the Abu Dhabi Investment Authority (ADIA), has invested extra oil revenues abroad for more than thirty years and amassed a still-growing portfolio worth approximately $750-900 billion. ADIA is widely believed to be the world's largest sovereign wealth fund—indeed the world's largest institutional investor. But Abu Dhabi is not yet a "developed" economy. So, in 2002, the Mubadala Development Company was established as a government-owned investment vehicle. Unlike ADIA's mandate to build and manage a financial portfolio, Mubadala's charge was to develop Abu Dhabi. According to some observers, ADIA was a "sovereign savings fund," while Mubadala was a government-owned investment firm. Mubadala is supposed to invest the wealth of the emirate in activities that would diversify the economy away from energy and into industry and services. Although each Mubadala investment is supposed to earn large returns, the strategy balances financial against "strategic" returns. ADIA and Mubadala are the institutional architecture to manage the wealth of the Abu Dhabi sovereign.

Despite widespread scepticism, there is a fundamental continuity in the stability of the European Monetary System (EMS) before and after the 1992 crisis. Although speculative pressures provoked European leaders to widen the fluctuation bands of the Exchange Rate Mechanism (ERM), thus altering substantially the official commitment of member governments to coordinate monetary policies and exchange rates, the values of currencies in the hardcore of the EMS have remained close to their pre-crisis parities with limited fluctuations. European monetary cooperation continues informally, achieving much more stability than the wide bands suggest. The task of the article is to explain the puzzling continued success of the EMS. First, this article re-specifies the problem of international monetary cooperation as a leader–follower interaction with inherently hierarchical attributes. Second, the article outlines the causes of exchange-rate stability in Europe. Finally, the article emphasizes that French monetary followership is the key to the stability of the post-crisis arrangement and offers a preliminary interpretation of the sources of French behaviour.

In this essay we revisit the principles of “embedded liberalism” and argue for their relevance to the contemporary global economy. The most essential principle is the need for markets to enjoy social legitimacy, because their political sustainability ultimately depends on it. From this principle we analyze three current sets of practices and institutions in which ongoing crises of legitimacy demonstrate the need for a renewal of embedded liberalism and a revitalization of global governance. They are as follows: the activities of transnational corporations, particularly with regard to core standards in labor and human rights; the organization of the international financial architecture; and the formal rules and informal norms of international organizations.

Abdelal, Rawi, and John G. Ruggie. "The Principles of Embedded Liberalism: Social Legitimacy and Global Capitalism." In New Perspectives on Regulation, edited by David Moss and John Cisternino, 151–162. Cambridge, MA: Tobin Project, 2009.
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This Handbook gives an overview of the range and scope of International Political Economy (IPE) scholarship by mapping the different regional schools of IPE and noting the distinctive way IPE is practiced and conceptualized around the world. The Handbook examines, in a series of introductory chapters written by leading figures in each region, the evolution of IPE in the US, Canada, the UK, Asia, and Australia. These introductory chapters map out the contending approaches and key concerns that exist within each regional school. In each regional section, following the introductory chapter, chapters tackling key areas of IPE scholarship such as trade and development, finance, and global governance/globalization follow. Each chapter will be written by an established scholar and will showcase the particular approach(es) highlighted in the region-specific introduction.

The case opens in November 2015, after the Turkish military’s shooting down of a Russian military airplane over the Turkish-Syrian border. The incident threatened to undermine the countries’ political and economic ties, and starting from late 2015, the dialogue between Ankara and Moscow was suspended for several months. The case explores the initial steps toward rapprochement in June 2016. The central dilemma is this: whether in light of the existing uncertainties companies operating in both countries can resume their investments and commercial activities, or should decisions be put on hold? What is the best strategy during such turbulent times? Can companies bet that a reunion would last?

The United States could enhance or threaten China's energy security but China was unsure of the U.S. intentions. China and the United States were both friends and potential foes. In the meantime, Russia's own ambivalent relationship with the United States and its Western allies has worsened. In this context, China and Russia have grown closer. Bilateral ties in the energy trade quickly improved: Russian oil exports expanded, while disagreements on the terms of natural gas supplies have been resolved. The case describes the impact of the interplay of great power politics, domestic political considerations, and economic factors on the efforts of the Chinese and Russian energy companies to expand business ties.

In December 2014, Russia cancelled the South Stream pipeline that was envisaged to deliver natural gas through the Black Sea basin on to Europe and replaced it with a new pipeline through Turkey. The Turkish Stream was a great opportunity for Turkey to turn itself into an energy hub of its region. It had already secured TANAP, a natural gas pipeline to carry Azerbaijani gas to Europe through Turkey. The country's geographical position was one of its crucial assets: to its east lay 70% of the world's natural gas reserves, including Russia, Azerbaijan, Turkmenistan, Iran, Iraq, and the eastern Mediterranean basin. To its west was Europe, one of the biggest energy consumers of the world. If the Turkish Stream and TANAP pipeline projects were to go through and connect to other possible energy reserves within the wider region, was it likely that Turkey would eventually become one of Europe's main energy corridors—perhaps even a hub? Was it less risky to remain as a transit country and secure its own energy needs at potentially lower prices? What would be the consequences of being even more dependent on Russian gas through the Turkish Stream? Would Turkey be able to prioritize economic gains and take advantage of the available resources in its south?

The 2014 Ukraine crisis once again exposed the mutually limiting knot—a web of commercial relationships and oil and gas pipelines—that historically tied the European Union and Russia closely. In this crisis, a familiar conundrum preoccupied minds in the corridors of power in Western capitals: how to compel Russia to respect the Western geopolitical preferences without harming European allies? The answer, as in the past, pointed to the lack of viable short-term solutions and the longer term need for gaining energy independence without sacrificing energy security in the EU. The case chronicles latest efforts, and its unintended consequences, by all-union authorities in Brussels to untie the Russian knot by implanting American inventions in the European soil: liberalized, transparent natural gas markets and shale gas production. Executives of European and Russian energy companies present their views.

In the fall of 2013, the people of Ukraine disagreed passionately whether their country should intensify ties with the European Union or Russia. After President Yanukovych rejected the free trade agreement with the EU in November, thousands of Ukrainians peacefully protested. But the protest movement morphed into a violent, deadly confrontation in January, culminating in February in mass slaughter, an overthrow of government, foreign invasion, and international crisis. The four months that shook Ukraine is a case study on the interrelated problems of geopolitical struggle, politics of economic pacts and clash of regional economic blocks, post-imperial disintegration and trade, and identity and interdependence.

In 2012, the energy sector in the United States was demanding major reform. Prices of oil and gas had continued to cripple the middle and lower class as the U.S. economy slowly recovered. At the same time, the U.S. lagged behind developed economies in production of renewable energy. The acceptance of climate change remained a partisan issue. The development of hydraulic fracturing (fracking) promised an abundance of accessible, cheap, domestically produced natural gas, but the cost to the environment remained a point of debate. As incumbent Democratic President Barack Obama faced Republican opponent Mitt Romney in the 2012 election, their (and their parties') stances on energy policy and the environment differed in several major areas. The results of the election would shape the country's energy policy for at least the next four years and potentially create enough momentum to set energy policy of the United States for many years to come.

Russia and China are neighbors with complementary needs: Russia has an abundance of energy resources, which China needs to fuel its industry. The case analyzes the evolution of the China-Russia energy relations in the post-Cold War period, with an emphasis on the political factors, external and domestic, impeding and contributing to the full realization of the potential of energy ties between Russia and China.

In an overview of natural gas as a fossil fuel and traded commodity, the case describes various regional markets of natural gas, highlighting diversity of price formation mechanisms across and within those markets. Recent changes in the economics of unconventional natural gas extraction—"the shale revolution"—could potentially remake those markets, steering the world toward the "golden age" of natural gas.

This case describes Latvia's transition from a Soviet republic into an EU member, its economic boom and subsequent bust in 2008, and its policy response. After implementing significant economic and political reforms in order to qualify for EU membership in 2004, Latvia had turned its sights toward joining the single-currency eurozone, pegging its currency to the euro in 2005 as a step toward that goal. From 2000 to 2007, Latvia achieved faster GDP growth than any EU state. However, when large inflows of capital suddenly dried up in 2008, Latvia had to obtain a financial rescue package from the IMF, World Bank, EU, and several regional countries in order to avoid a full-blown financial and currency crisis. Latvia then adopted an aggressive economic adjustment program centered on maintaining its currency peg, which meant competitiveness would have to be restored by reducing domestic prices, wages, and public expenditures in order to drive down the real exchange rate. Latvia's policy program and initial results are discussed in the case.

Russian and German energy firms initiated the Nord Stream natural gas pipeline project with strong political support from their home governments but encountered resistance from other states. Although the pipeline would connect Russia with Germany directly, the project was not simply a bilateral matter. First, a need to secure construction permits in multiple jurisdictions around the Baltic Sea involved other countries. And second, Germany's membership in the European Union entailed compliance with goals and values of the entire union, which stressed the imperative of collective action in energy matters and dangers of succumbing to "national reflexes." Thus the implications of the project became a matter of concern to the entire European Union but Europeans struggled to articulate the meaning of Nord Stream: was it a "separate peace" between Russia and Germany to the detriment of the rest, or was it a pan-European deal to the benefit of all? As the case chronicles, the success of Nord Stream depended on the ability of its creators to ensure that latter view prevailed over the former.

Nabucco natural gas pipeline, initiated by a group of European energy companies, was intended to connect the broad gas-rich region of the Middle East and Central Asia to Europe for the first time, which would diversify supply sources. At the same time, an Italian-Russian consortium announced South Stream natural gas pipeline, which would diversify transport routes for the delivery of Russian gas to Europe. To win support, backers of Nabucco and South Stream insisted that their projects were aimed at fulfilling goals of the energy policy of the EU (reduction of use of fossil fuels to combat climate change and guaranteed physical availability and affordability of imported fossil fuels). But, as the case demonstrates, both projects progressed slowly, encountering many technological and commercial challenges, which, however, were eclipsed by the extreme politicization of Nabucco and South Stream: pipelines became a factor in domestic politics of several European nations and figured prominently in relations between the EU, EU states, Russia, Turkey, former Soviet republics in Caucasus and Central Asia, and the United States. Although they would comprise only a small part in the overall architecture of Europe's energy security, the case of Nabucco and South Stream reveals the limits of the ambitious energy policy of the EU.

In 2007, Khaldoon Khalifa Al Mubarak, the CEO of Mubadala Development Company (Mubadala), had every reason to be optimistic about the future of his home, Abu Dhabi, one of the emirates comprising the United Arab Emirates (UAE). The tiny, sandy, and dry emirate with a population of 1.5 million, only 420,000 of whom were citizens, was nestled upon nearly 10% of the world's known reserves of oil and the 4th largest proven reserve of natural gas. With the price of oil doubling every 10 years between 1970 and the 2000s, the state-owned Abu Dhabi National Oil Company (ADNOC) had enjoyed an era of increasing profitability. Another state-owned firm, Abu Dhabi Investment Authority (ADIA), had been investing extra oil revenues outside of the county for more than 30 years, and the intensely secretive organization had amassed assets worth an astonishing—and still rapidly growing—$500 billion to $900 billion. A common refrain held that Abu Dhabi nationals could live off of the returns generated by ADIA forever. Some accordingly referred to the emirate as "the richest city in the world." Yet Al Mubarak, trusted advisor to the crown prince Mohamed bin Zayed Al Nahayan, and Mubadala were charged with transforming the economy of the emirate. Many were concerned that Abu Dhabi was in danger of suffering from the so-called "resource curse," as its economy focused on fossil fuels and little else. Not only would Abu Dhabi's economy continue to be subjected to the vagaries of world energy prices, there would be little for its citizens to do. Not everyone could work for ADNOC or ADIA. Not everyone was from one of Abu Dhabi's handful of incredibly wealthy families. To be a developed country, Abu Dhabi needed change. Fortune had already played perhaps too large a role.

Although the global trend toward liberalization of electric utilities forced Enel, the largest power company in Italy, to give up some of its assets in its home base, it also opened up many opportunities abroad, including in Russia, one of the largest electricity markets in the world. The case outlines Enel's internationalization strategy and then focuses on one piece of the company's strategic puzzle of global expansion: acquisition of major power-generation assets in the course of the break-up of RAO UES, the Russian electricity monopoly. The case highlights the decision-making process by the company executives in the context of possible political risks to foreign investment in Russian strategic industries and economic risks to investment in the yet-to-be-formed liberalized and deregulated electricity market in Russia.

In 1997, amidst Japan's ongoing financial problems, Prime Minister Ryutaro Hashimoto sought to restructure the financial sector to make it more transparent and globally competitive. He hoped that this effort, dubbed the "Big Bang" after the British financial restructuring a decade earlier, would prove as successful. But the financial problems, which seemed to have abated, looked as if they might be worsening. Thus, Hashimoto had to weigh priorities. Should he focus on long-term restructuring, immediate financial rescue, or both? Might an over-emphasis on long-term restructuring increase the chances that major banks could collapse? And what were the best economic and political strategies in these arenas? As a major developed economy, Japan offers an analog to the problems that faced the United States in its 2008–2009 financial crisis.

Provides background on the history and status of financial integration in the European Union. Describes the pertinent treaty-based "fundamental freedoms," emphasizes challenges to further cross-border consolidation in the banking sector, and examines the regulatory role of the European Commission in fostering conditions conducive to further financial integration.

The collapse of central authority in the Soviet Union in 1991 ushered in a period of revolutionary transformations for the states that emerged in its wake. The leaders of Russia, the USSR's successor, since then have struggled to reestablish central authority while seeking to avoid further disintegration, establish a democratic polity, and institute a market economy. The case contrasts different approaches adopted by Presidents Boris Yeltsin and Vladimir Putin and concludes with a vision outlined by Russia's third post-Soviet president, Dmitry Medvedev. The case focuses on problems of state authority, fiscal capacity, institutionalization of political parties, relations between the federal center and provincial governments, relations between the state and big business, economic policy, and models of economic development.

In 1997, amidst Japan's ongoing financial problems, Prime Minister Ryutaro Hashimoto sought to restructure the financial sector to make it more transparent and globally competitive. He hoped that this effort, dubbed the "Big Bang" after the British financial restructuring of a decade earlier, would prove as successful. But the financial problems, which seemed to have abated, looked as if they might be worsening. Thus, Hashimoto had to weigh priorities. Should he focus on long-term restructuring, immediate financial rescue, or both? Might an over-emphasis on long-term restructuring increase the chances that major banks could collapse? And what were the best economic and political strategies in these arenas? As a major developed economy, Japan offers an analog to the problems that faced the United States in its 2008-09 financial crisis.

Critics have accused Gazprom, the world's largest natural gas producer, of eschewing market principles in favor of the foreign policy priorities of the Russian government, ever since the energy giant cut off the supply to Ukraine in January of 2006. The purported motive for the decision, however, seems to indicate the opposite: the company claimed that it had no other choice because the sides failed to conclude a contract on the terms of future trade. The case takes a look back in history for clues that may resolve this paradox. It highlights how politics shaped the economics of natural gas trade in the former Soviet Union and Europe since the late 1960s until the end of the 1990s; sketches the story of the creation of Gazprom by the first post-Soviet government of Russia; and describes how the erection of new sovereign borders in the wake of the dissolution of the Soviet Union, coupled with political and economic transition, created major problems in the gas trade between the former Soviet republics, emerging with the greatest intensity in the Russian-Ukrainian relations.

President Putin publicly stated that Gazprom, the largest natural gas producer in the world, was a powerful political lever of the Russian state in the world and a keystone in the foundation of the country's energy security. Thus the top leadership of Russia has charted the course of the company's future away from the seemingly imminent dismemberment, privatization, and, by implication, de-monopolization toward a challenging combination of strengthened state control, professional, transparent management, and a major expansion. The case explores how in 2000–2008 Gazprom's management has pursued the strategy defined by the politicians. Gazprom's impressive expansion strategy envisioned diversification of markets, products, transportation routes, and modes of delivery. The challenges were equally formidable: massive investment needs, a possibility of a production shortfall, and a chronic problem with the transit state of Ukraine, to name a few. In fact, Gazprom's ambitiousness fully reflected the ambitiousness of Russia as a whole, characteristic of the Putin era.

The case describes the resolution to the January 2006 gas crisis, precipitated by the decision of Gazprom, the largest natural gas producer in the world, to cut off gas supply to Ukraine because of disagreement on the terms of future trade. The case also narrates the events that have followed: the adoption by Gazprom of a comprehensive policy to renegotiate prices with the rest of the former Soviet states; the erratic relationship with Ukraine, dependent on the internal political configuration in the latter at any given time; and a persistence of Gazprom's negative image in the world.

New York State Attorney General Eliot Spitzer faced a decision about how to stop wrongdoing committed by major Wall Street firms during the Internet boom. The equities analysts of Merrill Lynch and other Wall Street firms were charged with objectively advising retail investors whether to buy or sell publicly traded stock. The analysts had rated some stock a strong buy, while at the same time disparaging it in Internet emails as "a piece of junk" or a "powder keg." Spitzer concluded that the analysts sometimes issued such buy ratings on stock of companies because of a conflict of interest: the Wall Street firms the analysts worked for were making handsome fees for underwriting the companies' stock offerings and providing other services. The usual procedure when an enforcement agency such as the Federal Securities and Exchange Commission (SEC) discovered such a situation would be to complete its investigation and negotiate a resolution privately with the financial firm. If it could not resolve the matter, the agency would formally file suit against the firm in court. This option was open to Spitzer, but the 1921 New York statue gave him an alternative. Even before filing suit in court--and while continuing to investigate the firm further--he could broadcast his findings to warn the public and brand the firm with wrongdoing. This case investigates the decision Spitzer made, and its long-term implications for U.S. financial regulation and financial industries.

Why do managers become corrupt? Does corruption ever pay? When do friendly relations cross into bribery? How can CEOs manage and prevent outbreaks of corruption? These and other questions are raised by three short case studies of corruption in Germany: at the global engineering firm Siemens, the automaker VW, and the chemical giant BASF. While German law not only permitted overseas bribery but even made it tax deductible until 1999, it was not welcomed in some nations where Siemens did business such as the United States-or in Germany after 2000-but old practices continued. Cooperative management-labor relations, often seen as key to the post-World War II German industrial powerhouse, went sour at VW, as a top manager secured key concessions by paying for union leaders' lavish foreign travel and visits to prostitutes. After vitamin prices sagged in the late 1980s, BASF and the Swiss chemical firm Hoffmann-La Roche plotted a global cartel that lasted a decade and raised the prices of many vitamins 50 percent or more. In the end, even after record criminal fines and jail time for some executives, some observers argued, such practices were likely to recur.

Involves the March 2005 takeover bid launched by ABN Amro, the Dutch bank, for Padua-based Banca Antoniana Popolare Veneta S.p.A. (Antonveneta)--a bid that many would view as a test of Italy's commitment to the creation of a single European market for financial services, as well as the openness of the Italian retail banking market. Provides background on European financial integration and developments in the Italian banking market over recent decades, describes events surrounding ABM Amro's bid and the emergence of a competing bid by a much smaller Italian rival, and the role of the Bank of Italy in determining the fate of Antonveneta.

The International Financial Architecture is one of the core modules of Managing International Trade and Investment, an elective course at Harvard Business School. Provides instructors with an overview of the module, the cases and readings, and the teaching notes.

Shortly after Infosys was founded in 1981, its managers faced a major turning point when they made a decision to operate without giving in to the petty corruption rife in the Indian economy. Within just a few years, that decision had truly defined the company. Over the next 25 years, Infosys managers went to extraordinary lengths to avoid even the most modest of practices that they considered inappropriate. Explores the practices and methods that Infosys adopted instead, considers their costs, benefits, and generalizability, and contextualizes the problem within Indian political and economic institutions that continue to evolve.

In Maseru, the capital of the Kingdom of Lesotho, the stirrings of industrialization and modernization were promising, and more than 50,000 workers, mostly women, were employed in the textile sector; the figure reflected more than a threefold increase in just a few years. Just outside Maseru, however, life was pastoral. Of Lesotho's 1.9 million citizens, 86% were engaged in subsistence agriculture. The country's hopes for progress rested with the jobs created by Taiwanese and Chinese firms. In early 2006, however, the survival of the nascent industry hung in the balance. The appreciation of Lesotho's currency, the loti, made life difficult for the apparel firm, which exported almost all of their production to the United States. Although the firms enjoyed duty-free access to an otherwise protected U.S. clothing market through the African Growth and Opportunity Act, the provisions that most benefited Lesotho would expire in 2007. A few large buyers would be making sourcing decisions that could make or break Lesotho's industry. Local union leaders were upset with the government's handling of the textile boom and its putatively impending bust. Certainly the government would play an important role in formulating a strategy and adjusting the institutional context, but decisions made by the unions, foreign investors, foreign buyers, and the American government would also be critical. How would posterity judge Lesotho's first encounter with world markets--as a triumph or a disaster?

In the autumn of 2002, JAFCO Asia, a subsidiary of JAFCO Co., Ltd., became the first foreign private equity firm to open an office in Beijing's Haidian Science Park. JAFCO was the only Japanese private equity firm operating in China. As such, Managing Director Vincent Chan observed, "JAFCO is the bridge between Japan and China." Yet, under that bridge the waters appeared increasingly choppy. While the economic relationship between Japan and China had grown increasingly close, their political relations had not and some Japanese firms had begun to reassess their commitment to China. Would capital-rich Japan and capital-poor China find a way to transcend their troubled history? Could JAFCO Asia be a catalyst for cooperation, or would its managers find their own operations affected by rivalry between Asia's two most important countries? The mix of formal rules and informal practices that governed foreign private equity firms in China was complex. Opening an office in Beijing signified a renewal of JAFCO Asia's efforts to master these challenges and coincided with an acceleration of the firm's investments. But JAFCO's first years of engagement with China had not been notably successful, and without some fundamental changes, there was little reason to believe that the addition of a physical presence there would yield better results now.

Operations of Royal Dutch/Shell in Russia included a strategic alliance with Gazprom, the country's natural gas monopoly, the development of the Salym oil fields in Siberia, and a small retail refilling network in St. Petersburg. Focuses on the Sakhalin II project. Sakhalin II is the reason for the existence of the Sakhalin Energy Investment Co. (SEIC), owned by Royal Dutch/Shell (55%), Mitsui (25%), and Mitsubishi (20%). Worth approximately $10 billion, the second phase of Sakhalin II would be the single largest investment decision in the history of Royal Dutch/Shell, as well as the single largest foreign direct investment in Russia's history. Sakhalin II would also be the largest integrated oil and gas project in the world. The project, however, faces a number of challenges, however. A production sharing agreement (PSA)--a commercial contract between the foreign investor and a host government that replaces the country's tax and license regimes for the life of the project--governs Sakhalin II. Although Sakhalin II's PSA enjoys the status of Russian law, other Russian laws conflict with the terms of the PSA. PSAs have also become controversial within Russia. After several years of waiting in vain for "legal stabilization," Shell and SEIC executives must decide whether the project should go forward.

Tells the story of the Czech transition from a centrally planned to a free market economy, describing the first economic reforms, the fixed-exchange rate regime, and the voucher privatization. Also explains why, in the middle of the 1990s, the Czech Republic liberalized its capital account and how this affected the Czech banking system, leading to a massive credit boom. Explores why Ceskoslovenska Obchodni Banka (CSOB), the country's fourth largest bank, decided not to participate in the credit boom and how CSOB determined and pursued its expansion strategy. Students assume the position of Pavel Kavanek, CSOB's CEO who, in June 2000, must decide whether CSOB should acquire IPB, another large Czech bank on the brink of bankruptcy.

Surveys scholarship on democracy and democratization. Describes the relationship between democracy and the environment of business, including capitalist economic institutions, economic growth, economic reform, and international relations.

Describes Standard & Poor's sovereign credit ratings scales and the credit rating process. In particular, describes the role and function of the rating committee and the analytical categories considered in arriving at a final sovereign credit rating.

Describes Standard & Poor's sovereign credit ratings business. Provides background on the history of credit ratings agencies, the meaning of credit ratings, the expansion of the sovereign ratings business over recent decades, and the market for credit ratings. Also, discusses current debates in the United States and elsewhere relating to the use of credit ratings in financial and prudential regulation.

By 2002, the euphoria that accompanied the grandest achievement to date of Europe's 50-plus years of integration--full monetary union--was fading fast. European policy makers completed the historically unprecedented monetary integration of 12 countries, and then they turned their attention to an equally challenging issue: enlarging the European Union (EU). By the beginning of the 21st century, 13 countries clamored for membership in this most exclusive club of rich, democratic, European states. With so many prospective members knocking on the door, European policy makers were forced to decide quickly whom to let in and under what conditions.

In less than a decade, Bombardier had grown from a medium-size Canadian company to a highly profitable global player largely on the strength of the introduction of a new generation of regional jet and successfully marketing its product to airlines around the world. Events taking place on the other side of the globe, however, threatened Bombardier's hard-earned success. A nasty trade dispute with Brazilian rival Embraer was dragging on into its fifth year with no end in sight. Recent developments in the dispute at the WTO were forcing CEO Robert Brown and his team to decide on a strategy for what could very well turn out to be the most critical year in the company's history.

On September 1, 1998, the government of Malaysia imposed currency and capital controls in response to the financial crisis that had swept Asia. The controls sparked an enormous controversy in the world of international finance. Some celebrated the controls for insulating the Malaysian economy from the unstable international financial system. Others criticized the controls for trapping investors and allowing the government to protect the interests of "cronies." This debate also raised the central question about the future of the international financial architecture: What is the appropriate balance between financial market freedom and government discretion in the management of the global economy?

In April 1994, the world witnessed a political milestone in South Africa. After decades of repression and racial segregation, South Africa's black majority came to power at last, as the African National Congress (ANC), led by the celebrated Nelson Mandela, rode into power with 63% of the vote in the country's first racially inclusive election. Eight years after this electoral victory, however, many South Africans are starting to question the shifting priorities of the ANC. Although the political situation of the country has vastly improved, the economy remains fragile, and some of the ANC's most loyal allies are decrying what they see as a change of faith. Thabo Mbeki, a former political exile who became president in 1999, must now decide what democracy means for South Africa and how best to preserve it.

Only in the waning years of the 20th century did international financial markets begin to enjoy the freedom from government regulation that they had experienced before the first world war. By 2002, international capital markets had grown to be enormous--$1.2 trillion flowed around the globe per day. The massive size of the market presented policy makers with a serious challenge as they were forced to grapple with the costs and benefits of such mobile capital. This note briefly relates the modern history of capital controls and summarizes scholarship on the advantages and disadvantages of international financial market regulation.

Surveys approaches to understanding the state; highlights the relationships between the state, order, and property; and offers an analytical framework for how states vary from place to place and over time.

Describes Russia's troubled economic transition since 1991, highlights the problem of institutional development, and surveys the challenges President Vladimir Putin faced in 2000. The first section provides a brief synopsis of liberalization, stabilization, and privatization under President Boris Yeltsin. The second section describes the economic difficulties Russia experienced during the 1990s involving demonetization, federalism, taxes, contract enforcement, the legal system, the 1998 financial crisis, and public health. Concludes with President Putin's political and economic plans.